One of the problems with installing an OS over the top is that it does not always replace damaged .dll files if there are already copies installed. You may have some success if you delete all the .dll files and then try to re-install over the top, but otherwise, I would think you need to wipe your C:\ drive (don't forget to do all the backups first from Safe Mode and amkje sure you have a bootable floppy with CD drivers), the get all your Hardware drivers ready and install from scratch.
It's likely to be a virus - could be the sasser worm (you should find the removal tool on symantecs or microsofts websites - use another machine if you can't use yours). If it was a regular software related problem, a format would have solved the issue (viruses can get round disc formats). Alternativly, you could check your hardware to make sure nothing's overheating (but this seems unlikely from what you've descibed) :)
Thought Sasser didn't affect W98 machines sounds like a hardware/driver problem as you are able to boot in safe mode and it happens after a clean install might be worth removing your cards except for the graphic card?
I had the same prob, however this was due to there not being enough power from the psu due to my graphics and loads of drives, however this seems unlikly for you.mmmmm. It must be a drvier prob if it runs ok in safe mode.